Purchasing power is what a sum of money can actually buy. It falls when prices rise, so it is the other face of inflation, a point the Bureau of Labor Statistics makes in explaining what its price index is for. A £50 note keeps its face value for ever; what it will buy does not stay fixed.
Measuring it takes a price index. Multiply the amount by the index at the start and divide by the index at the end. With the US CPI-U annual average at 172.2 in 2000 and 321.943 in 2025, $100 kept in a drawer since 2000 buys what $53.49 bought then. Its purchasing power fell by 46.5% while prices rose by 87%, and the two percentages differ because one is measured against the old price level and the other against the new one. The rise in prices and the loss of purchasing power are the same movement, seen once from the side of the goods and once from the side of the money.
The idea is the honest way to compare amounts across time. A salary of £30,000 ten years ago and £36,000 today look like a 20% rise, but if prices rose more than that over the decade you can buy less now. A pay rise of 3% in a year when prices rise 4% leaves you about 1% worse off, since 1.03 ÷ 1.04 − 1 = −0.96%. The same reasoning tells you whether a savings rate is keeping your money whole or only slowing its decline.
The inflation calculator reports purchasing power directly from each country's official index, beside the adjusted amount and the average yearly rate, and the retirement calculator shows its projections in today's money so that a figure decades away can be read in terms of what it will buy.